KUALA LUMPUR, Feb 20 — Investment, Trade and Industry Minister Tengku Datuk Seri Zafrul Abdul Aziz said that as an open trading nation, Malaysia will likely be affected when there is an economic contraction or decline in the gross domestic product (GDP) of the country’s main trading partners.

He said that GDP is a measure of the health of the country’s economy, in addition to consumption by the government and the people (public and private consumption) and investment.

"GDP is also represented by trade, which includes both exports and imports. In terms of trade, in general, exports (goods and services produced domestically and sold abroad) will increase GDP, while imports of goods and services brought into Malaysia will reduce GDP,” he said in a post on X today.

The minister said 2023 was challenging but in December, Malaysia recorded 44 consecutive months of trade surplus since May 2020.

Total trade exceeded RM2 trillion for the third consecutive year but economic challenges such as inflation, geopolitical unrest and supply chain disruptions impacted Malaysia’s trade results and GDP growth, said Tengku Zafrul.

"Our trade ratio is 128 per cent to GDP. Hence, Malaysia is also affected when there is a contraction in the economy or GDP of our main trading partners,” Tengku Zafrul said, adding that China’s overall trade fell by 5 per cent in 2023 compared to the previous year.

He elaborated that the weakness of China’s economy, with a decrease in exports by 4.6 per cent and imports by 5.5 per cent, has had an impact on Malaysia, as China is Malaysia’s largest trading partner, contributing 17.1 per cent to the country’s total trade in 2023.

Tengku Zafrul also noted the total value of Taiwan’s international trade contraction of 13.6 per cent to US$784.35 billion in 2023, compared to US$907.5 billion in 2022 (US$1=RM4.797).

In addition, the minister said trade in goods of the Group of 20 (G20) countries also contracted, where exports fell by 3.1 per cent and imports by 2 per cent.

Meanwhile, the United Nations Conference on Trade and Development (UNCTAD) projected a 5 per cent contraction in global trade for 2023, or about US$1.5 trillion less than in 2022.

At the same time, the World Trade Organisation (WTO) had also reduced the growth forecast for global trade to 0.8 per cent in 2023, compared to 2.7 per cent in 2022.

In the Asean region, for the year 2023, Thailand’s exports decreased by 1.0 per cent, Indonesia’s trade surplus decreased by 32.4 per cent, and Singapore experienced a decrease in goods trade by 11.7 per cent.

In that regard, Tengku Zafrul said that the strengthening of the US dollar throughout 2023 compared to various currencies, including the ringgit, has had an impact on trade performance.

This is because although the value of exports is more competitive, the cost of imports for raw materials also increased, he said.

"These factors impacted Malaysia’s main exports, such as electrical and electronics (E&E), palm oil and other commodities, and affected the overall trade balance and GDP,” Tengku Zafrul said.

He, however, expressed confidence that trade and GDP growth projections will be better for Malaysia in 2024. — Bernama